#enterprise Buy now, pay later giant Klarna sees losses quadruple
Buy now, pay later giant Klarna sees losses quadruple: Rising prices power Swedish agency £500m into the purple amid slowdown in shopper spending
Buy now, pay later (BNPL) agency Klarna noticed losses greater than quadruple within the first six months of this 12 months amid mounting doubts over its enterprise mannequin.
The Swedish firm, which at one time was Europe’s Most worthy non-public tech agency, reported a mammoth lack of £502million for the primary half of 2022, in comparison with a £114million loss in the identical interval final 12 months.
This got here regardless of the quantity of products it helped to promote by providing its credit score service rising 21 per cent to £35billion, whereas revenues climbed 24 per cent to £816million.
Slump: Swedish Buy now, pay later (BNPL) agency Klarna, led by boss Sebastian Siemiatkowski (pictured with spouse Nina), reported a lack of £502million for the primary half of 2022
Klarna, which is the world’s greatest supplier of BNPL credit score – serving 150m clients together with 15m within the UK – attributed the dismal outcomes to greater credit score losses in new markets and an increase in worker prices.
Founded in Stockholm in 2005, Klarna final reported a revenue 4 years in the past earlier than embarking on a interval of speedy worldwide growth.
But it as been hit by a slowdown in shopper spending amid hovering inflation, and faces a looming crackdown together with within the UK the place there’s at the moment no regulation of BNPL merchandise.
‘Klarna has been operating in a very different environment in the first half of 2022…When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,’ mentioned boss Sebastian Siemiatkowski.
He added that the agency would in future deal with methods to ‘accelerate us back to profitability’, together with lending ‘a little less’ to new clients so as to minimize the group’s credit score losses from those that discovered themselves unable to repay their borrowings. The firm’s merchandise permit individuals to defer funds into instalments.
Klarna is in style with youthful shoppers and in sectors similar to clothes and quick trend – segments which are at the moment on the sharp finish as households reduce on spending amid surging costs of necessities similar to meals and power.
The darkening financial outlook means Klarna has suffered a painful fall from grace over the previous 12 months. It was valued at a whopping £39.2billion in a funding spherical in June final 12 months.
But a pointy sell-off of expertise shares earlier this 12 months, amid market panic about their development prospects, has despatched its worth tumbling.
As a consequence, final month Klarna struggled to lift extra money at its excessive valuation, and finally raked in £687million from buyers however at a much-reduced worth of £6billion.
Neil Wilson, analyst at Markets mentioned: ‘The tech bubble has popped. Investor patience for companies like Klarna is running thin and there are questions over the business model.
‘What happens if the regulators crack down next year?’ Britain’s Financial Conduct Authority has been damning concerning the sector and Klarna.
It beforehand warned corporations promoting unregulated BNPL merchandise towards utilizing deceptive promoting, saying they could be ‘committing a criminal offence’ if they didn’t abide by guidelines regarding monetary promotions.
The watchdog has additionally raised considerations that buyers may very well be ‘misled’ if purchase now, pay later adverts didn’t characteristic distinguished warnings concerning the dangers to clients, together with taking up debt that they can not afford to repay.
Moves to enhance oversight of the sector come amid considerations that BNPL lures individuals into borrowing extra money than they can feasibly repay, leaving them extra uncovered to cost-of-living shocks.